Capital Gains and What You Actually Need to Know

I had a conversation with a client recently, one of those that starts out casual but lands squarely in the deep end of tax law. In her 90's, his mom isn’t as mobile as she used to be, and the family was talking about what happens to her house when she’s gone. The practicalities, the emotions, the next chapter,  all of it. But inevitably, the conversation turned to tax.

“So how do we avoid the capital gains tax when I inherit the house?”

Fair question. But it also reveals just how much confusion exists around this topic. Most people think they know how capital gains and inheritance taxes work, and then they’re surprised when reality looks very different.

Let’s talk about what actually happens in Canada, with references to government and professional resources so you know this isn’t just “something I heard.”

There Is No Inheritance Tax in Canada

First things first: Canada does not have an inheritance tax the way some U.S. states do. You don’t pay tax just because someone left you property or money. In fact, money or assets received through inheritance aren’t considered taxable income by the CRA. (Fidelity Investments Canada)

This is hugely important because people often assume a big bill is waiting just because a property changes hands at death. That’s simply not how Canadian tax law works.

What Does Happen: Deemed Disposition

When someone dies, the CRA treats most capital property, including real estate, as if it were sold at fair market value just before death. This is called a deemed disposition. (Canada)

No physical sale occurred. No buyer walked through the door. But for tax purposes, it’s treated as though it did.

If the property had increased in value since it was bought, that “deemed sale” can trigger a capital gain. The estate must report this on the deceased person’s final tax return. (Canada)

This is the moment where most people assume you personally owe tax when you inherit the property,  but that’s not the case. The estate handles any tax triggered by the deemed disposition.

Principal Residence Exemption: Your Best Friend

Here’s the crucial point: if the property was the deceased person’s principal residence, most or all of the capital gain can be sheltered from tax under the Principal Residence Exemption. (Canada)

What that means in practice:

• The home is treated as if it was sold at fair market value at death.
• A final tax return is filed for the deceased.
• The Principal Residence Exemption is claimed.
• The capital gain is eliminated.
• The estate pays no capital gains tax on that property.

Shares of this exemption apply whether it was a detached home, condo, or other qualifying housing unit. (Canada)

If the home wasn’t a principal residence,  say it was a rental property or secondary cottage,  then the exemption doesn’t apply and a taxable capital gain would be reported. (Canada)

You Don’t Pay Tax Just Because You Inherited It

This is probably the biggest myth out there: inheriting a house means you pay tax.

Not true.

Canada has no inheritance tax. Money or assets you receive through inheritance aren’t considered taxable income. (Fidelity Investments Canada)

In most cases:

• You do not report the inheritance as income. (H&R Block Canada)
• You do not personally pay capital gains tax at the moment you inherit. (srjca.com)
• Tax implications only arise if and when you sell the property later,  and even then only on gains above the value at the time you inherited it. (srjca.com)

How the Tax Gets Calculated (if it Applies)

Remember: the tax exists at death if the property was not the principal residence. The capital gain is the difference between the original purchase price (adjusted cost base) and the fair market value at death. (Canada)

Canada currently taxes capital gains by including 50% of the gain in income. This “inclusion rate” is still the rule administered by the CRA for now. If that changes in the future, that would require legislative implementation. (Canada)

So if someone bought a property for $700,000 and it’s worth $1,500,000 at death:

• Capital gain = $800,000
• Taxable portion = 50% × $800,000 = $400,000
• That $400,000 gets included in income on the deceased’s final return and taxed at marginal rates. (Canada)

Importantly, the estate pays this. You don’t receive a personal bill for it.

Adjusted Cost Base: Your Starting Point When You Inherit

When you inherit the property, your Adjusted Cost Base (ACB) becomes the fair-market value at the date of death. (srjca.com)

That matters because if you later sell the house, capital gains are calculated based on:

Sale price − ACB (value when inherited)

Not what your parent paid decades ago.

So using our earlier example, if you inherit at $1.5M and sell years later for $1.6M, your taxable gain is based on that $100,000 difference,  not $800,000.

Probate and Estate Administration Tax (Ontario)

Even in the clearest inheritance scenarios, there is one cost many people forget: Estate Administration Tax (often called probate tax) in Ontario. (Ontario)

In Ontario:

• The first $50,000 of estate value is exempt. (Ontario)
• For the portion over $50,000, the tax is typically $15 per $1,000 of value. (Ontario)

That means on a $1.5M estate, the tax is paid on $1,450,000 minus the exempt amount, and can be a significant administrative cost. (Ontario)

This is not income tax or capital gains tax, it’s a provincial administration fee that the estate pays before assets are distributed.

Common Misunderstandings (Cleared Up)

When I talk to people about this, there are a few things I hear all the time that simply aren’t true:

Myth: “I’ll owe tax just because I inherited the property.”
Reality: There’s no inheritance tax in Canada, and you don’t report inheritance as income. (Fidelity Investments Canada)

Myth: “CRA taxes the benefit of inheriting a house.”
Reality: Tax arises only from the deemed disposition at death, and only on gains. (Canada)

Myth: “If the house is worth a lot, I automatically owe a tax penalty.”
Reality: If it was your parent’s principal residence, the gain can be fully exempt. (Canada)

Myth: “I pay tax as soon as I inherit the house.”
Reality: You don’t pay capital gains until you sell — and only on gains above the stepped-up cost base. (srjca.com)

Why This Matters

This topic isn’t abstract. It affects families, often when emotions are high and there are other pressures to manage. Knowing what actually happens, and what doesn’t, gives you a huge advantage in planning and peace of mind.

The estate settles any tax obligation before you receive the property. Once it’s in your hands, you only owe tax if and when you sell, and even then only on post-inheritance gains.

Let’s Be Practical for Your Situation

In your case, inheriting a mortgage-free house that’s been your mom’s principal residence for 40+ years, the tax outcome in Canada is as clean as it gets:

• No capital gains tax because of the Principal Residence Exemption. (Canada)
• No inheritance tax upon receipt. (Fidelity Investments Canada)
• You don’t pay tax just because you inherited. (H&R Block Canada)
• The only cost is Estate Administration Tax in Ontario. (Ontario)

If you later sell the property or rent it out, any gain is calculated from the value at inheritance forward, not from what your mom paid decades ago. (srjca.com)

Final Thought

Capital gains and inherited property are often misunderstood, but the fundamentals are straightforward when you look at the rules instead of the rumours. Make sure you get accurate information early, talk with legal and tax professionals, and don’t let myths drive your decisions.

If you’d like a short summary table, social excerpts, or a checklist for your clients/readers, just let me know, I can build those next.

Every spring in GTA, the real estate market performs the same little magic trick.

Buyers suddenly feel optimistic. Sellers suddenly feel ambitious. And everyone collectively forgets what happened the year before.

So instead of guessing what Spring 2026 might look like, let’s do something radical and look at what actually changed between April 2024 and April 2025. Not headlines. Not vibes. Just numbers, explained in plain English, with a bit of sarcasm where it’s earned.

Prices are always where people want to start, mostly because it’s the least comfortable place to begin. According to the data, Toronto prices barely moved year-over-year, while Peel softened more noticeably. Maybe it’s because Toronto has a stronger demand, or the listings are being priced better. This is much easier to understand when you stop looking at dollar amounts and start looking at direction. When both markets are indexed to the same starting point, Toronto essentially shrugs while Peel gently steps back.

**I would like to stress that the numbers here are all taken from TRREB's market stats and include all listings. I will show you individual segments further down the blog.**

What this tells us heading into Spring 2026 is fairly simple: the market is no longer doing anyone any favours. Prices aren’t collapsing, but they also aren’t bailing out bad decisions. Strategy now matters more than timing, and hope has officially stopped being a pricing plan.

If prices were the quiet story, days on market was the loud one. Homes in both Toronto and Peel took longer to sell in April 2025 than they did a year earlier, with Peel seeing a bigger jump. This wasn’t because buyers vanished, it was because buyers slowed down. They asked more questions. They compared more listings. They stopped writing offers in moving cars.

When you look at this as a simple trend line, it becomes very hard to argue that something is “wrong” with a listing just because it didn’t sell in a week.

For Spring 2026, this means patience is no longer optional. The market still works, but it works on a schedule it sets, not the one sellers prefer.

Now for the part that explains almost everything else: inventory. Active listings jumped sharply in both markets between April 2024 and April 2025, and Peel in particular saw a meaningful increase. This is where the power shift happens. When buyers have choice, behaviour changes. They stop settling. They stop rushing. They start negotiating again.

Spring 2026 is shaping up to be a market where competition between listings matters more than competition between buyers. That’s not a bad thing, but it is a different thing, and pretending otherwise is how listings quietly expire.

Sales volume, unsurprisingly, moved in the opposite direction. Fewer transactions closed in April 2025 than in April 2024 across both Toronto and Peel. This tends to panic people, which is unfortunate, because it shouldn’t. Buyers didn’t disappear, they just became more selective. The people who moved forward were prepared, financed, and intentional.

For Spring 2026, this suggests a market that rewards decisiveness and preparation. Casual interest still exists, but it no longer controls outcomes.

Of course, all of this becomes far more useful once we acknowledge that not all homes behave the same way.

Detached homes, particularly in Toronto, remain the most resilient. Demand didn’t vanish, but patience became part of the process. In Peel, detached homes felt the increase in inventory more directly, and buyers became far less forgiving of pricing that aimed high and hoped for the best. Spring 2026 will reward sellers who understand that preparation and pricing are not optional extras; they are the entire strategy.

Semi-detached homes continued to quietly do what they always do: appeal to a broad buyer pool and move steadily when priced correctly. Toronto semis showed more stability, while Peel semis were more sensitive to overpricing. This remains one of the healthiest segments of the market, provided expectations stay grounded in reality rather than nostalgia.

Condo apartments are where expectations tend to drift the furthest from the data. Inventory matters more here than anywhere else, and buyer behaviour is far more analytical. The relationship between listings and sales tells the real story, and when you plot those two together, the shift in leverage becomes very clear.

For Spring 2026, condo sellers need to understand that buyers are comparing everything. Layout, fees, light, parking, and price all matter, and the market is perfectly comfortable waiting for the right combination.

Condo townhomes, meanwhile, continue to be underestimated. Driven largely by end users and families, they tend to perform well when priced realistically, but they are unforgiving when they’re not. Fees, functionality, and layout matter more here than almost anywhere else, and the market notices quickly when those details are ignored.

So where does that leave us heading into Spring 2026?

This is not a boom market. It’s not a collapse either. It’s a thinking market - one that rewards realism, preparation, and good decision-making, and quietly punishes everything else.

Homes that respect buyer choice will sell. Homes that rely on hope, old comparables, or the “let’s just see” mindset, will sit. Not angrily. Not dramatically. Just patiently, online, waiting for expectations to catch up.

And if there’s one lesson April 2024 to April 2025 made very clear, it’s this: the market doesn’t need confidence - it needs clarity.

If you want help figuring out where your specific property fits into this picture (before the spring rush, not after) that’s a much better conversation to have right now.

And it usually saves everyone a lot of stress and time.

Getting the House Ready for the Spring Market

(A Do / Please Don’t List)

Hey y’all — if you’re even thinking about selling your home this spring, I wanted to put together a list of do’s and, for the love of all things real estate, please don’ts.

Before we get into it, there’s one very important rule of thumb you need to tattoo on your brain:

Money in is NOT money out.

Read it again.
 Say it out loud.
 Whisper it to yourself before opening Pinterest.

This applies even — especially — to major renovations. If you’re about to spend more than $10,000 on anything before selling, please do me (and your future sanity) a favour and make sure you actually enjoy it for at least a year before you list.

Otherwise… you’re just donating money to a stranger.

Now let’s get into it.

1. START. NOW.

January is a fantastic time to start prepping for the spring market. You’ve got time on your side. Spring market is still about eight weeks away, and life hasn’t gone fully off the rails yet.

The single best thing you can do right now?
Start packing.

You’re moving anyway.

Everything that clutters up your space — especially the stuff you don’t use but “like to look at” — does nothing for your sale. Buyers don’t want to admire your knick-knacks. They want to imagine their stuff in your house.

So pack it. Early. Calmly. Without panic.

2. Fix What’s Broken (Yes, All of It)

If something doesn’t work, fix it.

That includes:

• Ice makers
• Water dispensers
• Appliances that “mostly work”

Buyers notice these things immediately. And no — they don’t think, “That’s an easy fix.”
They think, “What else hasn’t been maintained?”

If something needs replacing, deals are everywhere. Facebook Marketplace is a goldmine. I helped prep a house last year and found a nearly brand-new dishwasher from an office building for $150.

This doesn’t need to be expensive. It just needs to be done.

3. Lighting: Kill the Vibe Killers

If your light fixtures are outdated — replace them all.

Nothing kills the vibe of a house faster than bad lighting and old fixtures. The good news? This is one of the cheapest, highest-impact upgrades you can make.

The lights stay with the house, so give buyers something modern and clean. Amazon and big-box stores have endless options. Go LED. Make sure the lighting temperature can be adjusted from bright to soft.

Good lighting makes everything look better — including houses that aren’t perfect.

4. PAINT. PAINT. PAINT.

If I had to pick one thing that gives you the biggest return for the least amount of effort, this is it.

Whatever colour is on your walls right now — neutralize it. White. Light taupe. Soft neutral tones. Give buyers a blank canvas.

Painting is not that time-consuming and usually runs anywhere from $1,500–$6,000, depending on the size of your home. Do it yourself and it’s even cheaper — plus you can bribe friends with pizza and beer.

This is hands down the most effective thing you can do before selling.

5. Storage Is Not Optional

If you’re staging properly (which I strongly recommend), you need somewhere for your stuff to go.

Stagers do this for a living. They know how to present a home better than you do — that’s literally their job. Let them do it.

Look into short-term storage or clear out your garage. And please, if you do have a garage, make sure people can actually walk into it.

I can’t count how many homes I’ve seen where the garage is so full it might as well not exist.

6. Light Kitchen & Bathroom Refresh (If You’re Feeling Ambitious)

If you want to go a step further than paint and towels — and you’re okay with a bit of elbow grease — consider:

• New mirrors
• Updated hardware
• Light fixtures
• Faucets

Again, Amazon is your friend. Hardware is cheap. Swapping it out can make kitchens and bathrooms feel completely refreshed without tearing anything apart.

Final Thoughts (From Someone Who Wants You to Win)

This is not an exhaustive list — but it is the best place to start.

If you follow even most of these suggestions, you shouldn’t be spending more than $10,000 getting your house ready. Often much less.

And if you’re thinking a brand-new kitchen or bathroom will make or break your sale — I can tell you firsthand: it won’t. You will almost always throw that money away.

Think about how many times you’ve walked into a house and immediately critiqued the design choices.
Now imagine that being every single buyer who walks through your door.

So why spend money just to give strangers something to critique?

If you want an honest, no-BS opinion on how your home stacks up against what’s on the market right now — and what’s actually worth doing before spring — reach out. I’m always happy to give you my expert advice.

Just… please don’t start with a full renovation.